Cereal prices will remain high, says FAO

By Karen Willmer

- Last updated on GMT

Related tags: Cereal prices, Rice, Cereal, Maize, Fao

Cereal prices will remain high, despite the record world cereal
production forecast, the Food and Agriculture
Organisation (FAO) said in a report this week.

Weather conditions have affected yields across the world, as well as a rise in demand for grain from the biofuel industry, causing continuing pressure on cereal prices, the FAO stated. The FAO also said the estimated import requirements of the 82 developing countries in 2006/2007 is currently forecast at 90.3m tonnes, 3m above the previous year, putting added pressure on the cereal prices. This follows the FAO's announcement last month that cereal prices, particularly wheat and maize, had already reached levels not seen for a decade. Prospects for the 2007 European harvest have deteriorated following drought, the FAO stated, while twenty-eight countries are reportedly suffering from food shortages worldwide. The predicted record output of over 2bn tonnes of cereal is up 5.3 per cent on 2006, which the FAO said is mainly due to the strong maize harvest in the US. However in Africa, Morocco's cereal crop has been devastated by drought, as with Zimbabwe, Namibia, Lesotho and Swaziland. Irregular rain has meant the cropping season has been slow to start in Western Africa, and in Somalia. The FAO was particularly concerned for the maize crops in Swaziland, Zimbabwe and Lesotho following dry spells and erratic rainfall. Zimbabwe have also been affected by lower food production and rising prices, the report said. Violence in Somalia, and a food security problem in Iraq have also been highlighted by the FAO report. Within Asia, the FAO report said China, India and Pakistan had a bumper wheat crop for 2007, but the weather conditions in Bangladesh meant wheat crop was affected there. However, prospects for the coarse grain and rice crops in the Far East were favourable due to the monsoon rains arriving at the correct time. Cereal production for underdeveloped countries that need to import cereals is predicted to rise by just 1.2 per cent, despite the strong growth over the past four years, the report stated. This is below the rate of population growth and the report said if China and India are excluded, overall cereal output for the rest of the developing countries will be lower on last year. The report said that this, along with the higher international export prices on cereals, is likely to cause a strain on supply of the developing countries in 2007/2008.

Related topics: Markets

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